Public Bill Committee

[Mr. Christopher Chope in the Chair]

Written evidence to be reported to the House

RESB 01 Hertfordshire County Council

Clause 26

Nomination of primary authorities

Amendment proposed [this day]: No. 16, in clause 26, page 13, line 3, at end insert—
‘(c) the regulated person gives 3 months notice that it wishes to terminate the nomination’.—[Mr. Prisk.]

Patrick McFadden: I was coming to the conclusion of my remarks on amendment No. 16 at the end of the previous sitting. Essentially, as the hon. Member for Solihull said, those remarks deal with whether the relationship can be forced. That is at the heart of the question.
There are a number of safeguards in clause 26 regarding the primary authority relationship. It mentions, for example, that the Local Better Regulation Office may only nominate a local authority if
“the authority and the regulated person have agreed in writing”
or when
“the regulated person has requested LBRO to make a nomination under section 25(1)...and LBRO considers the authority suitable for nomination”.
We want to give LBRO powers on such matters, partly because we think that there could be unfairness if many authorities simply opt out of the responsibilities that go with primary authority status, and if that work is being done by only one or two authorities. In the vast majority of cases, the relationship will be voluntary—after all, arranging such a relationship will be preferable to forcing it—but we want to give LBRO the power.
Under the amendment, if a business can simply opt out unilaterally, the danger, from a regulatory point of view, is that it could shop around, perhaps looking for its version of the right answer to a particular regulatory question. We do not think that a situation in which the relationship is forced should be the norm, but we do think that, as a backstop, it is important that LBRO can bring two parties together, rather than allowing a continual opting out of the primary authority relationship for a business in a multi-site—

Mark Prisk: Will the Minister say, from a practical point of view, what steps a business should follow if it decides or feels that it needs to terminate or revoke the nomination of the primary authority?

Patrick McFadden: We spoke in this morning’s sitting about a situation in which one supermarket chain takes over another. The business could go to LBRO and say, for example, “We have been taken over by another group in another part of the country, so we think that the primary authority should no longer be local authority A, but local authority B.” That would be a perfectly rational thing to do. One would hope that LBRO would look kindly on such a situation. There are mechanisms whereby, for completely rational reasons, a business can say that it wants the primary authority to be changed. A similar circumstance could arise if a business moved its headquarters or principal centre of operations from north to south, for example. It would make sense for such a business to have a different primary authority relationship.
I am not saying that the arrangements should be frozen for ever once they are established, but there should be circumstances in which LBRO can say, “This is the relationship that we want to put together.” Under the amendment that the hon. Gentleman has proposed, the business could continually withdraw from primary authority relationships simply by giving notice, without the kind of reason that I have described. The danger is that we could have regulatory shopping around for the best deal, as it were, which I do not think would serve the Bill’s purpose.

Ann McKechin: Will the Minister confirm how the LBRO will determine the suitability of Scottish local authorities as primary local authorities, given that there is no specific requirement for the membership of the LBRO to contain anyone with a Scottish background, be that a member of the Scottish Government or a person from the Scottish local authority?

Patrick McFadden: By the same criteria as anywhere else. It would depend on whether the company, which operates in multiple areas, has headquarters in a particular Scottish local authority, or has its main operations in a Scottish area. It may also have operations in different parts of Scotland or across Scotland and England. The same principle would apply in all those cases. There is a clause in the Bill that sets out the territorial application on which we touched. Assuming that territorial application applies and that we are talking about functions that are reserved, then LBRO’s primary authority principle will operate in the same way in Scotland as elsewhere.

Mark Prisk: The debate has been useful because it has helped to clarify an issue that is not very clear in the Bill. Clause 26(5)(b) refers to when LBRO “considers it appropriate”. The Minister has now made it clear that a number of avenues are available to businesses to enable them to terminate any particular relationship with a primary authority. That has been helpful. In some ways, it would have been better for it to have been explicit, but with that clarification, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 ordered to stand part of the Bill.

Clause 27

Advice and guidance

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: I shall be brief. The clause defines the core role of the primary authority as giving “advice and guidance” to the business for which it is the primary authority and to other local authorities regarding how they should regulate the business. Therefore, it is a three-way relationship between the business and what we are calling enforcing authorities in the Bill. This clause allows the primary authority to be the business’s first port of call for advice on enforcement issues with national implications and allows the primary authority to make recommendations about the handling of particular issues that arise in its work to other local authorities.
Under subsection (2), a business and its primary authority may make arrangements to manage their partnership. The Bill does not prescribe what should be included in such an arrangement, but it may include, for example, a memorandum of understanding setting out the rights and obligations of each party. When a business and a primary authority choose to make arrangements, the primary authority must have regard to guidance issued by LBRO. The clause sets out the advice and guidance function of primary authorities, which will be an important part of their work.

Mark Prisk: I am grateful to the Minister for those initial remarks. As the Minister says, the clause sets out the advice and guidance elements of primary authorities, in particular their role to advise and guide regulated persons as well as other local authorities through the regulations set out in the schedules of the Bill. The Government’s explanatory notes shed a bit more light on the matter. They show that that would mean that a regulated person in the primary authority should make agreements “as they see fit”. That could raise the vexed question of how to strike a balance between improving regulatory practice to lower the regulatory burden on the one hand and ensuring consistency on the other. The Bill is trying to straddle that classic balance between achieving consistency and raising standards individually. What principles does the Minister think that the LBRO will follow to ensure that one business does not gain over its competitors from a less regulatory environment, and if an enforcing local authority fails to follow a primary authority’s guidance, what legal responsibility does it have to the business involved?

Patrick McFadden: On the issue of consistency, which is what this part of the Bill is all about, LBRO acts as an arbiter. For example, the enforcing authority might feel that the arrangements between the primary authority and the regulator—the hon. Gentleman quotes from Government guidance—are actually a bit of a sweetheart deal, as I think I mentioned this morning: that they have entered into a cosy arrangement with each other, with the effect that the enforcing authority does not believe that the regulations are being properly enforced.
Apart from the advice and guidance function of LBRO, it also has an arbiter function, and that takes us back to some of this morning’s debates about advice and direction. In those circumstances, the enforcing authority can appeal to LBRO to look at the situation and see whether the regulations are being properly enforced, or whether the primary authority relationship is not conducive to better regulation with regard to the public interest in the area that the enforcing authority represents. That arbitration role of LBRO is important. It is something that is not enforced as it might be under the current regime, which is another reason for establishing the body.

Question put and agreed to.

Clause 27 ordered to stand part of the Bill.

Clause 28

Enforcement action

Mark Prisk: I beg to move amendment No. 12, in clause 28, page 13, line 24, leave out from ‘is’ to ‘it’ in line 25 and insert
‘inappropriate and that compliance could be secured by an alternative enforcement action’.

Christopher Chope: With this it will be convenient to discuss the following amendments: No. 13, in clause 28, page 13, line 26, after second ‘the’, insert ‘originally proposed’.
No. 14, in clause 28, page 13, line 27, at end insert
‘and to take the alternative enforcement action mentioned above’.
No. 31, in clause 28, page 14, line 13, leave out paragraph (b).

Mark Prisk: I will discuss amendment No. 31 in a moment, as it is distinct. The first three amendments seek to return greater flexibility of power to primary authorities—something that was in the Government’s first draft of the Bill. There are three amendments to subsection (2) on page 13, and rather than deal with them individually, to aid members of the Committee I will read how the new subsection would read once amended, so that the picture can be seen in its entirety:
“If a primary authority determines within the relevant period that the proposed enforcement action is inappropriate and that compliance could be secured by alternative enforcement action, it may within that period direct the enforcing authority not to take the originally proposed action and to take the alternative enforcement action mentioned above.”
That would be the net effect of the three amendments, although I stress that they are probing amendments and seek to understand the subsection.
As currently drafted, the clause is much narrower than in the original Bill as presented to the other place. As such, it limits the primary authority to intervening by preventing one form of action by an enforcing authority. The amendments, which have the support of the British Retail Consortium, seek to re-establish a wider remit so that where better alternative actions exist, the primary authority can direct the enforcing authority to implement them. That would enable the primary authority to act more positively, and not be negative in its activities.
I fully accept that the wording that I used is not perfect—that is my error and not that of the Clerks. However, I wish to consider the practical issues and perhaps the Minister could focus particularly on why the Government decided to change the original wording. Secondly, does the Minister recognise that more flexible powers would better enable primary authorities to fulfil their role? That is the heart of the amendments.
Amendment No. 31 relates to subsection (9) on page 14. It defines the relevant period within which a primary authority must decide whether enforcement actions can or cannot proceed. Subsection (9)(a) specifies that that might be
“the period of five working days”,
which for most companies is a normal working week. It means that during that time the business is in limbo about whether it will face a sanction, fine or whatever. In business, time is money and that is particularly the case for small businesses who may be affected by such legislation. The matter should be hanging over them for as short a period as is reasonably possible.
Subsection (9)(a) is good, because five working days is perfectly reasonable and sensible. My problem is that paragraph (b) then states that “relevant period” can mean
“such longer period beginning with that day as LBRO may direct.”
Why does the Minister believe that the LBRO should need any longer than five working days? That would cause difficulties for smaller businesses. Rather than the major organisations with large legal departments, this concerns the smallest family businesses that have only two or three people who are just trying to get on with their job. They have a personal sanction and are waiting to know what will happen. Is not five days enough? I look forward to the Minister’s response.

Lorely Burt: The area of greatest discomfort for me is that the clause will bestow on one local authority the power of veto over another authority’s enforcement decisions. That not only is undemocratic, but gives the primary authority de facto powers of legal interpretation that are the proper function of the courts. The amendments and the new clause that I have tabled would remove that veto and leave it to a court rather than a primary authority to decide whether enforcement action was unjustified in the light of advice given to a company by the primary authority. I should be grateful if the Minister would try to give some reassurance and a little more information on that matter.

Patrick McFadden: The hon. Member for Hertford and Stortford posed two questions in moving his amendment. One was why the Government had changed their position somewhat on the issue since the draft Bill was published and the other related to the relevant time, so I shall try to cover both points. He is right that there was something of a change in the position and that the amendment he proposed would take us back closer to where the process started in the original consultation. I will explain why the Government changed their view on that during the consultation. Subsection (2) is clear about what the grounds are. It states:
“If the primary authority determines within the relevant period that the proposed enforcement action is inconsistent with advice or guidance previously given...it may within that period direct the enforcing authority not to take the enforcement action.”
The test, therefore, is inconsistency with advice or guidance previously given, and that test is narrower than the one we originally proposed and the one outlined in the hon. Gentleman’s amendment, which would be whether it was inappropriate.
When we consulted on that issue before the final version of the Bill was published, a number of stakeholders and local authorities told us that they were concerned about that because it would give the primary authority a role that was more akin to a free-ranging right of review, rather than asking it to answer what is a clearer and more narrowly defined question on whether the enforcing authority had acted in a manner consistent with the advice that was given. We took those representations on board and narrowed them down somewhat. In doing so, I believe that we have, to some extent, eased the burden on primary authorities with regard to what they are required to look at in those circumstances. Some primary authorities—even very experienced ones—have a number of headquarters in their areas. We are concerned that a wide test, such as the test of inappropriateness, would leave them having to play a much more interventionist role, rather than judging enforcement action on the basis of consistency of advice.

Judy Mallaber: I can see that my hon. Friend is saying that it gives a narrower power of discretion and judgment to the primary authority. However, there could still be circumstances in which the enforcing authority felt that it had a good, specific, local reason to take different action from that in the original guidance. Will my hon. Friend tell me what the situation will be? Will there be a right of appeal to the LBRO and whose view would ultimately prevail in that circumstance?

Patrick McFadden: That is where LBRO’s arbitration role comes in. My hon. Friend is right to say that. If the test was the original, wider appropriateness test, rather than the consistency test that we have now written into the Bill, there would probably be many more appeals to LBRO.
I hope that helps the hon. Member for Hertford and Stortford in relation to his amendment. I understand what he is driving at, as it is pretty close to the position where the Government began on this. However, we have listened to the representations about the burden that would be put on primary authorities. As I said, significant concerns were raised by people charged with enforcement. They said that giving primary authorities such a general right to block enforcement action would be wide-ranging—much more so than the consistency test—and that it would put a substantial burden of liability on the primary authority, which would find itself required to make a thorough investigation of every aspect of a particular enforcement action.
This morning, we discussed the concerns of the hon. Gentleman’s local authority about the burdens that will potentially be imposed on it by the Bill. My fear is that, compared with the consistency test, the amendment would increase those burdens. That is why we have made the change.
Before I turn to a further point made by the hon. Gentleman, I will mention a couple of the stakeholders who have commented on this. Representatives of the professions involved, such as the Trading Standards Institute and the Chartered Institute of Environmental Health, have welcomed the change we will make in this regard. The consistency test gives the primary authority more of an objective role, which is founded on judging the action against the advice that it has given. That is why we have narrowed the power in that respect.
On the point about the extension to the normal deadline of five working days, the hon. Gentleman is right that the normal deadline would be five working days. However, subsection (9)(b) states,
“such longer period beginning with that day as LBRO may direct.”
In the conversations that we have had with local authorities, including Hertfordshire council, five working days is thought to be sufficient in the vast majority of cases and is normally enough to give the enforcing authority time to judge the consistency test, about which we are talking in relation to the clause.
The ability to extend the deadline has been included to provide some flexibility in situations where, for one reason or another, it might not be possible for the primary authority to respond in five days. For example, a particular event in the primary authority area might mean that staff are diverted on a short-term basis and that the primary authority is unable to commit resources to considering such a referral. A case might be particularly complicated and occasionally might take longer than five days. The Local Authorities Coordinators of Regulatory Services—the local authority regulation body—has commented on the Bill and has recommended that we extend the term from 28 days as a matter of course. We do not want to do that because we agree with the hon. Gentleman: time is money and we do not want unnecessary extensions. Five days should be the norm in most cases. However, we do think that the provision for some flexibility makes sense. I hope that on that basis, the hon. Gentleman will not choose to press the amendment.

Mark Prisk: The debate has been helpful. I understand that it was slightly ironic to propose what the Government were originally proposing and then to watch the Minister explain why they have changed their mind. It is very good to see—

Patrick McFadden: It is all part of the consultation.

Mark Prisk: The listening Government. I am sure that that is all part of the process and we just hope that it is more successful than it has been elsewhere in Government business. It is entirely right that the Minister should reflect that consultation and that is welcome.
With regard to amendment No. 31, I confess that the moment the phrase “28 days” loomed I suddenly thought that we were in another place, discussing other matters. Thankfully, I do not feel so passionately about it that I feel the need to leave the room, but the debate is important.
It was particularly helpful that the Minister made it clear that the Government’s wish and the LBRO’s wish is that five days is the norm and that there has to be a jolly good reason for going beyond that. That is an assurance that I know small businesses will want. The idea that 28 days should be the norm is nonsense; it might be convenient for the local authorities, but in the end the paying customer is the small business. Small businesses are the ones who all of us in the public sector rely on to generate the wealth to pay for our incomes and we should not forget that. Although I understand that there will be exceptional cases, as long as that is the case and as long as we recognise that five days is the normality, it would seem that we have made a gain today. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 ordered to stand part of the Bill.

Schedule 4 agreed to.

Clause 29

Enforcement action: exclusions

Question proposed, That the clause stand part of the Bill.

Mark Prisk: I should like to raise some short questions, principally with regard to subsections (1) and (2). I am sure that the Minister will want to provide clarity to us. First, subsection (1) states:
“The Secretary of State shall by order with the consent of the Welsh Ministers prescribe circumstances in which section 28(1) to (4) shall not apply.”
It would be helpful if he described the circumstances in which consultation would not take place as it is not clear what that would extend to.
Secondly, subsection (2) states:
“Where a local authority other than the primary authority takes enforcement action against the regulated person in circumstances prescribed under subsection (1), the authority must inform the primary authority of the enforcement action it has taken as soon as it reasonably can.”
When informing a primary authority of enforcement action, given that people are waiting to know the sanction that may or may not be imposed on them, what would the Minister regard as unreasonable?
Thirdly, can the Minister tell us when it would be impractical to contact the primary authority? That is clearly a concern and it would be useful to know what exactly the Government have in mind.

Patrick McFadden: I hope I can shed some light on the hon. Gentleman’s questions. As he rightly said, clause 29 allows the Secretary of State to prescribe the circumstances in which the procedure requiring an enforcing authority to notify a primary authority of proposed enforcement action shall not apply. I shall provide some examples later, but I think that we can all probably think of examples where action needs to be taken then and there, where it may not be practical to do what is proposed, but I shall come on to that in a moment.
The primary authorities scheme is intended to provide consistency and certainty for businesses operating in a number of local authority areas, but it is also important that that should not be allowed to delay essential and routine action by local authorities where it is appropriate. Our extensive discussions with local authority enforcement officers and their representatives have demonstrated that although it is important that exemptions are made, the complexity and diversity of the underlying regulations dealt with in the Bill mean that secondary legislation is probably the most appropriate way of doing so.
The order-making power of clause 29 will allow for exemptions to be drawn up. That would include exemptions where the enforcement action was required urgently, for example to avoid a significant risk of serious harm to human health or the environment. I am sure that if we found somewhere serving unsafe food we would not want to wait five days, 28 days or whatever may be determined. Other cases might involve the financial interests of consumers—if there is a serious fraud going on, or financial interests are under threat—or where referring the case to the relevant primary authority might be wholly disproportionate.
The order may include, therefore, exemptions where delay would inhibit effective evidence-gathering or investigation of a breach, or where it would be impractical to seek the view of a primary authority when exercising powers—for example, under the Noise Act 1996. If speakers were blaring at 4 am, I do not think that we would want to wait five days. The underlying regulations are deliberately local in nature, and that could be another reason, as for example with many aspects of the Licensing Act 2003, or where the enforcing authority already has to seek approval for its proposed enforcement action from another force—that would meet the purpose of the notification requirement.
We have committed to laying an order under clause 29 as soon as possible after the Bill has come into force. I am happy to repeat that commitment to the hon. Gentleman today. I would also like to take the opportunity to clarify that the primary authorities scheme will not become operational until the exemptions have been drawn up and come into force. That is the context and content of clause 29.

Question put and agreed to.

Clause 29 ordered to stand part of the Bill.

Clause 30

Inspection plans

Question proposed, That the clause stand part of the Bill.

Mark Prisk: I thought that the Minister was about to rise gracefully to his feet and I hesitated, then he hesitated. I have only one brief question.

Patrick McFadden: I apologise to you and the Committee for being too slow off the blocks, Mr. Chope.
The clause makes provision for a primary authority to draw up an inspection plan containing recommendations as to how other local authorities should inspect a business for which it is the primary authority. That is important. It takes us back to the point made by the hon. Member for Solihull about risk-based inspection. The clause is intended to bring about greater consistency and co-ordination of regulatory enforcement for businesses that adopt the primary authorities scheme. That is one of the prizes in the regulatory regime—there can be an agreed inspection plan, which gives local authorities and businesses some clarity about what is inspected and what is appropriate in those circumstances.
Where another authority departed from the recommendations of the inspection plan, it would be required to notify the primary authority of that before carrying out the inspection, giving its reasons. That would help to support the sharing of strategic information between authorities. It would be important for the primary authority to learn why an enforcement authority might want to do that. It also might give the primary authority a better picture of how the business is operating throughout the country.
Subsection (3) lists examples of issues that can be addressed in an inspection plan, such as paragraph (a):
“the frequency at which, or circumstances in which, inspections should be carried out”
and
“what an inspection should consist of”.
The list is not exhaustive. The Government’s expectation is that inspection plans might address a number of other issues, including those areas where a business is dedicating resource to raise compliance itself, where that is an ongoing problem to which enforcement authorities should pay particular attention.
There are constraints on the content of an inspection plan. A primary authority must consult with the business before making such a plan and it must take into account any relevant recommendations relating to the frequency of inspection when drawing up an inspection plan. Again, that is an important part of the overall regulatory regime to encourage a more co-ordinated and strategic approach. I am sure that all of us in our constituencies regularly meet businesses that are asking for that kind of consistency. Any reasonable business expects, and does not mind, that it will occasionally be inspected. I recall visiting a business in my constituency a couple of weeks ago, when the owner said, “The trouble with inspections is that they are a bit like buses, you get none for a long time and then four turn up at once. We are not sure why, we have not been inspected for years”. An inspection plan, agreed between the primary authority and the enforcing authorities, would give businesses and the enforcing authorities clarity about what was expected.

Mark Prisk: I entirely agree that inspection plans have considerable merit. They provide what most businesses seek, namely, a degree of consistency, clarity and, most important, certainty—knowledge as to what they can expect, when they can expect the inspections and how they work from the business’s point of view. As the Minister describes, the fear is of not having been inspected at all and suddenly having three gentlemen or ladies with clipboards arrive within a week. First, it is immensely intrusive, and, secondly, it puts into the back of the mind the fear that, “Hang on, am I being targeted or do the three not talk to each other so we end up with this kind of nonsense?”
The purpose of the plan is right, but how prescriptive do the Government expect the plans to be? How far should the issues be detailed? Would the plan need to include a get-out clause, or an option to cover circumstances where something changes and there has to be a departure from the plan? Could the Minister clarify how the Government anticipate that it will work?

Patrick McFadden: Subsection 3 of the clause refers to frequency and circumstances, and what an inspection should consist of. We have not been more prescriptive than that in the clause. The hon. Gentleman is right to say that an enforcing authority may decide that an inspection is needed even if—to continue his metaphor—the bus is not due; it would be expected to inform the primary authority, but we are not so rigid as to say that an inspection in those circumstances should be banned. In fact there may be good reasons why it has to take place; we touched on those in our debate on the previous clause. Overall, an inspection plan would help to give clarity, both to local authorities and to businesses. There may be exceptions to the plan but at least having it will give business some idea of what is expected of them and how frequently to expect inspections.

Question put and agreed to.

Clause 30 ordered to stand part of the Bill.

Clause 31

Power to charge

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause is important; it is about the power to charge—a point we touched on this morning. It states:
“The primary authority may charge the regulated person such fees as it considers to represent the costs reasonably incurred by it in the exercise of its functions under this Part”.
The provision recognises two important points. The first is that there are costs in acting as a primary authority. The primary authority is, in effect, acting as an advice broker, both to the business and to other enforcing authorities. Secondly, it helps to address the concern of some small business organisations that primary authorities might devote whatever expertise they have in regulatory enforcement to dealing solely with the concerns of multiple-site, rather than single-site businesses. In that respect, clause 31 makes provision for a primary authority to recover the costs of carrying out its functions under part 2 from the business for which it is acting as a primary authority.
The clause also provides that a primary authority may charge only for costs that it has reasonably incurred and does not, therefore, allow a primary authority to profit from its functions under part 2. Furthermore, where a primary authority chooses to charge a business, it must have regard to the relevant guidance issued by the LBRO under clause 33.
As I said, small businesses welcome the power to recover costs and can now confidently expect a local authority that takes on the primary authority role not to divert resources away from the advice and support that they look to it to provide. One might ask why businesses should pay for that service when they already pay their business rates. However, participation in the primary authorities scheme will give businesses access to a range of services over and above those available to businesses in general.
The provisions in clause 31 are important to the functioning of the primary authorities scheme and respond to some of the concerns about costs raised by Hertfordshire and other councils.

Mark Prisk: This is an important clause, not least because it goes to the heart of several of our debates.
Hertfordshire may have been considering the Bill as it was before we debated it today, but the council was clearly concerned about the due costs, which we debated before lunch. Clearly, it has been decided that those costs will now be met by business, rather than through an adjustment within local authorities, which I am sure will please the Chancellor. I can understand the reasoning behind that decision, and there is an argument that the person who benefits from a service should contribute towards it. However, that raises the point—to return to an earlier debate—that only multi-site businesses can benefit from the primary authorities scheme, which provides quite a beneficial service for them to tap into. There is therefore a regulatory distinction between the businesses that can nominate primary authorities and the single-site small businesses that cannot. It is important that we bear that in mind.
On the specific point about the power to charge, the clause says that fees must
“represent the costs reasonably incurred”
by the authority, and that phraseology is perfectly acceptable. However, although the arrangements seem fair on the face of it, there are concerns, and I want to tease out a further response from the Minister.
The purpose of the Bill is to improve regulatory standards for businesses, principally by enabling them to nominate a primary authority as their sole local regulator. As the Minister said—almost in anticipation of my point—some businesses will say, “Hang on a moment. We’re already paying corporation tax and a range of other things.” They are paying their national non-domestic rates, or business rates as they are better known, so what are they paying for in addition? The CBI is not alone when it says:
“We do not see a compelling argument for why business should apply additional sums or why there should be a net increase in costs.”
The CBI’s essential point, which is not unreasonable, is that although it wants better regulation, why must business pay for what the Government should deliver anyway? That is a perfectly good point, and I would be interested to hear the Minister’s response.
My final point, which is just as important, is who will decide that a primary authority is making reasonable charges—to use the language of the clause? Will the LBRO be able to intervene or will it be the Secretary of State?

Patrick McFadden: The hon. Gentleman has given me the opportunity to refer to the impact assessment for the Bill, which details some of the costs and benefits. Referring to it will perhaps help to answer his question about what the benefit in all these things will be.
As ever with impact assessments, we are talking about an assessment. The purpose of the Bill is to review all the issues in three years, but the assessment of benefits to business from, for example, consistency of advice could be anything from £24 million to £48 million. Consistency of risk assessment could be anything between £3 million and £5.8 million and savings from more effective priority setting provision of guidance could be up to £32 million.
So there are substantial potential cost benefits to businesses from a regime under which the advice is more consistent and they are more certain that they can, for example, introduce more product lines, knowing how that might be judged in different parts of the country. Although cost recovery has been built in, to ensure that the primary authority principle does not become too much of a burden to the local authorities that take it on, there is still substantial benefit—in fact, far greater benefit—for businesses in having this regime than in not having it.
The hon. Gentleman asked who would determine the charges and who would judge whether they were reasonable. I fear that, on that question, I may have to come back to him or write to him.

Question put and agreed to.

Clause 31 ordered to stand part of the Bill.

Clause 32

LBRO support

Question proposed, That the clause stand part of the Bill.

Mark Prisk: The clause is an interesting addendum to what we have been talking about. Subsection (1) states:
“LBRO may do anything it considers appropriate for the purpose of supporting the primary authority”.
That is quite a wide statement and, while we do not want to be nonsensical, given that it is in the Bill and we are dealing with an unaccountable, non-departmental public body, it is questionable whether it should be able to do anything that it regards as appropriate. There is no requirement, for example, for the LBRO to act in a proportionate fashion. The clause does not say that it should act in an open and transparent manner. It would therefore help if the Minister clarified matters.
I am worried because it feels as though the clause has been inserted quickly and without due consideration. That feeling is reinforced by the fact that, having given us large, sweeping potential power under subsection (1), the clause suddenly realises that it may have gone a bit far, and suddenly we get subsection (2), which says, “Oh, and that includes making grants”. There is the impression that the clause has not entirely been thought through. I hope that the hon. Gentleman can reassure me about that.
Fine, I accept that the LBRO has the power to make grants. On what basis? For how much? Where will it work? What will the grants pay for? The clause is not well drafted. It gives a wide, sweeping range of examples and then someone has tacked in grants at the back of it as an afterthought. It does not feel like a coherent thought. I should be interested to know what the Minister believes would not be appropriate, so that we can understand how far the LBRO can extend itself.

Patrick McFadden: This is an enabling clause. We talked this morning about LBRO’s budget, which has been set at about £4.5 million a year. That is a relatively modest amount with which to carry out its functions. It would enable it possibly to give some support to local authorities in respect of functions that it asks them to do, which is why the clause includes making grants to local authorities. The Bill does not prescribe the circumstances in which LBRO may do that and it will ultimately be for its board to decide whether it wishes to exercise the functions. It is sensible to allow LBRO such a power to ensure that it is able to carry them out. It is sensible flexibility to provide the support that, as an independent body, it should provide.
There are constraints on LBRO’s expenditure within the normal Treasury rules. We talked this morning about the presentation of accounts to Parliament. That discussion was about time limits, but the normal Treasury rules would apply to expenditure. We think that it is sensible to have some flexibility to support local authorities in the work that we are asking them to do in this part of the Bill.

Question put and agreed to.

Clause 32 ordered to stand part of the Bill.

Clause 33 ordered to stand part of the Bill.

Clause 34

Orders under Part 2

Mark Prisk: I beg to move amendment No. 33, in clause 34, page 16, line 16, leave out from ‘Part’ to end of line 17 and insert
‘may not be made unless a draft of the instrument had been laid before, and approved by resolution of, each House of Parliament.’.
I was confused by the numbers. I heard 33 and assumed that it was the amendment. My apologies for that, Mr. Chope.
As hon. Members will see, clause 34 refers to various orders that Ministers may present to complete this legislation through this part of the Bill. The amendment seeks to ensure that they require the positive resolution of both Houses before becoming law. Part 2, which we are considering at the moment, introduces primary authorities which will affect most employers and every single local authority in our constituencies. Primary authorities will mean that many businesses in our constituencies will no longer be subject to the authority of our local authorities, and that is something that we need to consider. It is a radical departure from current practice. It is important that we, as hon. Members of this House, ensure that the workings of the new system are subject to proper scrutiny. Given that the LBRO will not be directly accountable to the House, is it not important that we ensure that the system is accountable to us? Rather than pursuing the negative resolution, I think that it is important to ensure that the system is covered by the positive resolution. I look forward to hearing the Minister’s response.

Lorely Burt: I support the hon. Gentleman. It is extremely important that with legislation of this nature, we should have the positive resolution. I hope that the Minister will give some thought to implementing this one important amendment.

Patrick McFadden: There are two amendments that one can guarantee will be moved during the passage of any Bill. One is the amendment that turns the word “may” into “shall” and the other will raise negative and affirmative order-making powers. Therefore, such an amendment was always going to come up.
Clause 34 is specifically about the order-making powers under part 2 of the Bill. There are various other order-making powers that are subject to affirmative resolution procedures, which we will discuss in part 3. This is about the order-making powers in part 2. There are four specific order-making powers in this part. The first of these, under clause 24, allows for the legislative scope of the primary authority scheme to be defined for Scotland and Northern Ireland. The next two orders in clauses 28 and 29 allow for exclusions and exemptions to the primary authority scheme to be specified. We discussed those in the debate on clause 29.
Finally, schedule 4 allows for detailed provision to be made for procedures in which matters raised by the primary authority scheme go to arbitration. The Government made it clear in their submission to the Delegated Powers and Regulatory Reform Committee that we believed these to be essentially technical matters, and that the negative resolution procedure was appropriate in those circumstances. None of the powers can be used in a way that would either extend the scope of the Bill or make other amendments to primary legislation—there is no sense of a Henry VIII power. We therefore believe that the negative resolution procedure is appropriate.
Two issues were raised in the debate on this in the other place. The Delegated Powers and Regulatory Reform Committee did not comment on the negative resolution procedure. However, that was on the condition that the orders establishing Northern Ireland and Scotland’s scope should not specify functions that did not already appear in schedule 3, which we discussed this morning. This is still about those headings set out in the enactments in schedule 3 about trading standards, fire safety and so on. It does not go broader than that.
There was also a view expressed in the other place that it should be made clear that the exemption orders should be required to exclude cases in which serious harm might result from the delay that the primary authority provisions could create. We are happy to make both of those changes, which are reflected in the Bill. We will shortly be consulting on the orders and will focus the consultation on enforcement specialists in local authorities and businesses, because they are likely to be highly technical, as I have said.
There is always a debate about whether orders should be subject to the negative or affirmative procedures. We certainly do not take the blanket view that the negative procedure should be used throughout the Bill. As I have said, order-making powers under part 3 will be subject to the affirmative resolution procedure, but we feel that the negative resolution procedure should suffice in relation to the orders covering the issues in this part of the Bill—particularly because the matter has been discussed in the other place and considered by the Delegated Powers and Regulatory Reform Committee.

Mark Prisk: This has been a helpful debate. I accept that a number of the orders principally relate to technical matters. As the Minister highlighted, the orders in parts 1 and 3 are subject to the positive resolution. However, that is not the case here. I considered the issue with some care and looked at the matter in terms of schedule 4. Enforcement action is quite an extensive part of the Bill in relation to the way it reaches the operations of the LBRO. That is particularly the case in those areas where the actions of the LBRO will impinge upon the businesses concerned—the regulated person, as it were.
My problem is that the LBRO itself is not accountable to us. Therefore it is important that we strengthen our ability to scrutinise the Government’s actions wherever else we can. Although I accept that, for the most part, the principal purpose of the orders for this part is technical, the enforcement action is nevertheless important. If I might refer to the metaphor used by the Minister, enforcement action will be the teeth that are often seen and, indeed, felt by the regulated persons. It is therefore important that we have the opportunity—no more than that—to debate these matters in an appropriate fashion. Although I understand the assurances of the Minister and do not always think it is appropriate to pursue the positive resolution on technical matters, on this occasion it is. I therefore seek to press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 8.

Question accordingly negatived.

Clause 34 ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.

Clause 36

Power to make orders providing for civil sanctions

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: If you will permit me, Mr. Chope, I will go slightly wider than may be appropriate and pause for a moment to talk about part 3. This takes us into the second significant area identified by Hampton in his report. The first area was inconsistency, and we talked about that a lot in parts 1 and 2 regarding the establishment of LBRO and the primary authority principle that we were debating.
We now turn to Hampton’s other significant criticism of the regulatory regime—inflexibility. This part of the Bill begins to address that issue, and gives greater flexibility to regulators in terms of the sanctions that they can impose. Some of those sanctions are monetary, some involve corrective actions or instructions for corrective measures to be taken, but they all address the issue of inflexibility and the disproportionate nature of having a one-club policy to enforcement—that of criminal prosecution.
Hampton’s work was built on by Professor Richard Macrory who, if memory serves me, published his report in November 2006. Macrory recommended a number of the different sanctions outlined in part 3, which acknowledges and introduces different powers, including fixed penalties, available monetary penalties, stop notices and so on. We will help ensure that rogue traders—or, as it says in my speaking note, “rouge traders”—will not continue to receive an unfair advantage by failing to adhere to the law, and we will increase confidence further in the regulatory regime.
The proposals have been welcomed by bodies including the Engineering Employers Federation, the Federation of Small Businesses, local authority enforcers and the Institute of Directors. There is widespread support for more flexibility in the system and clause 36 specifically allows a Minister of the Crown or a Welsh Minister to make an order providing for those new civil sanctioning powers as an alternative to criminal prosecution.
As I have said, the sanctions will provide regulators with more proportionate, flexible and effective ways of targeting regulatory non-compliance. Before making an order, the Minister must be satisfied that the regulator will exercise such powers in a manner that is in line with the principles of good regulation—we talked about that this morning—in a way that is transparent, accountable, proportional, consistent and targeted and used only in cases where action is needed. The Minister must seek the approval of the Panel for Regulatory Accountability, whose terms of reference include ensuring that the burden of regulation on business is kept to a minimum. That process is set out on pages 28 and 29 of a guide to the Bill published by my Department.
The Bill also requires the Minister to consult before making an order, and subjects it to affirmative resolution procedure. That means that the relevant parliamentary processes will apply to that order. Part 3 is an important part of the Bill. It addresses the issue of inconsistency, it gives greater flexibility to the regulators and it ensures that we will tackle these rouge traders.

Mark Prisk: I welcome some of the remarks that the Minister has made. He has identified that this clause seeks to provide powers to make orders providing for civil sanctions, but it then proceeds to do so right across the whole of the part. To follow his remarks, which edge slightly beyond clause 36, without testing your patience, Mr. Chope—I am sure that you will guide me should I stray too far—he is right to say that this part of the Bill, which provides many of the order-making powers, introduces a wide range of sanctions. We have fixed monetary penalties, discretionary stop notices and other enforcement actions. Those are provided not just for a single regulator, but for 26 different regulators, as well as all the local committees, so probably 30 bodies. Those include the Financial Services Authority, the Charity Commission, the Health and Safety Executive, the Football Licensing Authority and even the Human Fertilisation and Embryology Authority—so a really wide range of regulatory bodies.
Legally, the sanctions according to schedule 6, which I am sure we will come to in due course, apply to no fewer than 142 separate laws. Almost every aspect of our constituents’ lives will be covered by this: from housing to jobs, from animal welfare to protecting our children, from disability discrimination to Sunday trading. All of those statutes are listed in the Bill and are affected by the new range of sanctions that we are considering in the clause.
Most notably, the sanctions, which are often fines, will be imposed without recourse to the courts. The Opposition do not oppose civil penalties as a matter of principle, but we believe they are most appropriate for minor offences such as parking or speeding. The danger is that we may end up with the regulators handing out the equivalent of parking fines, which may prove rather attractive to them. That is bad for business and it undermines what we have debated so far—the concept of a risk-based approach to regulation as set out in parts 1 and 2.
Many business organisations are concerned. The Minister said that there was wide support. Let me joust briefly with two or three proponents on this side of the argument; he has mentioned two or three on his side. The British Retail Consortium is very concerned. It regards the section as “unacceptable”. The Forum of Private Business regards it as a deal breaker. The CBI says that
“business is still concerned that introducing more administrative fines will foster a ‘parking ticket’ mentality amongst inspectors, which will fundamentally change the existing relationship between inspectors and businesses”.
Let us be candid with one another: there are mixed views rather than a body of opinion that is wholly on one side or the other.

Lorely Burt: While the hon. Gentleman is talking about a parking ticket mentality among inspectors, does he agree that a parking ticket of £70 might be nothing to someone who has a good income—such as a Member of Parliament, dare I say it—but to a pensioner a parking ticket is a huge imposition? I certainly could not use the example of a Member of Parliament as regards changing behaviour, but a lot of people can disregard parking tickets and treat them as part of doing business, whereas for other people they make a big difference.

Christopher Chope: That was a long intervention. This Bill is not about parking tickets.

Mark Prisk: My allusion—

Lorely Burt: A metaphor.

Mark Prisk: It was a metaphor rather than an allusion. The metaphor was to illustrate not that we were talking about real parking tickets, but that we are talking about the danger that simply handing out fines or sanctions is not the way in which compliance is achieved. Obviously, the principles of Hampton and Macrory, upon which the Bill is based, are anxious that we do not go down that path. It is that mentality that the hon. Lady was referring to.
The concern about this section of the Bill and about the clause, which introduces many of the related powers, is not limited to business. There were serious and extensive debates in the other place, with contributions from members of all the political parties. The reason is that, while providing for what the Minister described as a simpler process of enforcement for the regulator, the provisions remove the right to be heard in an ordinary court of law. The orders in the clause, which would relate to fixed monthly penalties and discretionary monthly penalties elsewhere in part 3 of the Bill, mean that instead of any one of those 27 or so regulators only being able to investigate a possible breach, they would also be the people that would decide on a person’s guilt and who would hand out the sanction. They would have the dual role of investigator and prosecutor, and judge and jury, all in one body.
On Second Reading and in earlier debates, Ministers have been keen to say, “Ah, but there is an independent tribunal process”—an appeal process is available. There is, but it is just that, an appeal process. In other words, that process only happens after the sanction or the fine has been handed out. To use the criminal law equivalent, that only happens after the accused has been found guilty. There is, therefore, no opportunity for an innocent person to defend themselves until appeal. That is the crux of the concern.
The orders set out in the clause, which relate to the rest of part 3, are important. If the clause related to just one regulator or one piece of legislation, it might not be regarded as such a significant incursion. However, we are talking about over 27 different regulators, with 142 different pieces of legislation. It is therefore a huge shift in the law. Whatever the Minister’s original intentions, the clause has the potential to result in a significant reduction in our civil liberties. It is worth remembering that a regulated person—someone who could receive such a sanction or fine—is not just a business, but a person. Hon. Members may wish to reflect on that and what impact that might have on, say, a shop worker, who might suddenly find that those 27 regulators and 142 different pieces of legislation might well relate to them. That is worth bearing in mind.
My party and I have serious reservations about this part of the Bill. We understand the benefits of, as the Minister rightly says, not simply relying on one, crude, one-size-fits-all criminal approach and we understand that there is a good argument for the civil procedure, but our worry is about a wide range of powers for a wide range of regulators. Therefore, as we go through this and subsequent clauses, I hope that the Minister will be able to demonstrate why the approach is both right in principle and appropriate in practice.

Patrick McFadden: I shall try to answer some of the specific points without going into a Second Reading debate on part 3 of the Bill.
The hon. Gentleman raised two points, the first being about a parking ticket mentality and whether that would be encouraged—although I have said that we are not talking about parking tickets as such. There are safeguards against that developing too easily. Regulators will have to be satisfied to the criminal standard of proof—beyond reasonable doubt—that a person has committed an offence before a regulator can impose a fixed monetary penalty. The person will be able to make representations to the regulator before the sanction can be imposed. The hon. Gentleman was somewhat dismissive of the right to appeal against the sanctions to an independent tribunal, but it is there, in the Bill, and is an important safeguard against an abuse of the powers by a regulator. Also, regulators will not directly benefit from penalties, as any moneys gathered as a result will be paid into the consolidated funds. We are not setting up a money-making scheme for regulators.
The hon. Gentleman talked about businesses being concerned about judge, jury and so on all being one. In the end, we must make a judgment about whether we want to have a regime that includes such sanctions in addition to the traditional route of criminal prosecution. Criminal prosecution has been used until now—or often not used, because of various issues. It can be a disproportionate response to many instances of non-compliance, and we believe that regulators need access to a range of more flexible sanctions.
As Professor Macrory said, civil sanctions are an established part of the enforcement landscape. A number of regulators already have the power to impose them. It is not a new constitutional departure. It will give the regulators listed under the schedules to which he referred the capacity to use the sanctions as they do not use them at the moment, but the principle of them is not new. The powers will be conferred on regulators only if the Minister is satisfied that they will act in accordance with better regulation principles. We have talked a lot about them today when using the powers, so I shall not repeat that now.
Businesses will have an opportunity to make their case against the imposition of the sanction. They can make representations and objections, and have the right of appeal to an independent tribunal. We will argue the case further in respect of the individual amendments that we shall discuss, but we must make a judgment about whether we shall implement Professor Macrory’s recommendations and vary the mix of sanctions available under the regulatory regime. We have decided to do so, and that is what this part of the Bill does.

Question put and agreed to.

Clause 36 ordered to stand part of the Bill.

Clause 37

“Regulator”

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: With your permission, Mr. Chope, perhaps my comments can refer to clause 37 and touch on clause 38, as both clauses are definitional.

Christopher Chope: For people to follow the debate, it is much easier to deal with the Bill clause by clause, which is what we said at the beginning of our proceedings that we shall do.

Patrick McFadden: I take your guidance, Mr. Chope.
Clause 37 defines the terms “regulator” and “designated regulator”. The regulator is a person specified under schedule 5. That lists a number of national regulators to which the powers will refer, many of which are familiar to members of the Committee. Subsection (3) makes it clear what is not included, such as the Crown Prosecution Service, the police and so on because those organisations retain a role in respect of criminal prosecutions that are an alternative to the sanction regimes that we are discussing now. The clause defines the regulators to which the powers would apply.

Question put and agreed to.

Clause 37 ordered to stand part of the Bill.

Schedules 5 and 6 agreed to.

Clause 38

“Relevant offence”

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause describes the relevant offences that we are talking about in respect of a designated regulator. The Bill confers powers on the regulators set out under schedule 5 to have access to the new sanctions for relevant offences under schedule 6, which is why the two parts come together to define both the regulators and the offences to which we are referring.

Question put and agreed to.

Clause 38 ordered to stand part of the Bill.

Clause 39

Fixed monetary penalties

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause sets out the first of what could be called a suite of powers and sanctions and is specifically about fixed monetary penalties. Fixed monetary penalties will provide regulators with an effective tool, enabling them to deal quickly with low-level examples of non-compliance, rather than pursuing a costly criminal prosecution. Perhaps here more than anywhere, we see the stark contrast between what might be done under the new regime and the policy available under the current one.
Fixed monetary penalties are aimed at factually simple cases of non-compliance, which may or may not involve culpable conduct. For example, they could be used for strict liability offences, where it is not necessary to show intention to commit the offence, but they should benefit both regulators and business. They should also help to address the compliance deficit identified by Professor Macrory. That is important—one of the points that Professor Macrory made in his report was that not only was the system inflexible, but by having only one main tool to ensure compliance, there was actually a compliance deficit. Low-level non-compliance was either not being prosecuted or, in some high-level non-compliance cases, it was resulting in a fine that did not match the crime involved. It was not only a case of inflexibility; it was about not producing the desired results on compliance.

Judy Mallaber: Can my hon. Friend assist me by explaining what kind of offences he is talking about? In the company where I used to work, I remember that our administrator was always hugely affected by the advertisement from Companies House which stated that if accounts and orders about who was on the management committee were not returned on time, there would be a £2,000 fine. No one was sent to jail, but it was remarkable having that advertisement there—knowing that there might be a charge of £2,000 was certainly an incentive to get it done. Is that the sort of example that the Minister is talking about?

Patrick McFadden: It is a very good example. The previous Government introduced such penalties and civil sanctions for late filing, exercised by Companies House. That came up on Second Reading and, if I am right, rates of compliance following the introduction of those penalties went up. In 1991, the compliance rate was 86 per cent. In 1992 it immediately increased to 92 per cent., and it continued to increase to a level of 96 per cent. It shows that the previous Government were correct to introduce civil penalties in those cases. My hon. Friend is right that it is a good example, which I believe can be built on in some of the areas that we are talking about.
Turning to the clause, subsection (2) requires that regulators may only impose a fixed monetary penalty when
“satisfied beyond reasonable doubt”—
that is an important point referring to the criminal standard of proof—
“that the person has committed the relevant offence.”
Subsection (3) states that the amount of the penalty will be specified by the order made by the Minister. For example, the level of the fixed monetary penalty could differ according to whether the person liable is an individual or a body corporate. Subsection (4) caps the level of fixed monetary penalty at the maximum fine that would have been available for that offence if it had been tried summarily in the magistrates court. That is usually £5,000. There are other safeguards in clauses 40 and 41 for persons upon whom the fixed monetary penalties are imposed.
The clause sets out the basic regime for fixed monetary penalties. It is one of a number of sanctions that Professor Macrory recommended. We believe that, if enacted, it will be an important addition to what regulators can do to ensure compliance. It is also, importantly, an addition with safeguards built in for those who are subject to these procedures.

Mark Prisk: I welcome the Minister’s remarks. I confess that for a moment, when he said the previous Government, I was not sure whether he meant that led by Mr. Blair or the previous Conservative Government, but I think that by the look on his face he meant the Conservative Government. I am happy to confirm that he concurs.
There is a strong role for this kind of penalty. The Minister is absolutely right to say that built into the clause, thankfully, are some sensible safeguards. In subsection (2) we have the important principle, “beyond reasonable doubt”. Although hon. Members will realise that that is usually a criminal matter, it sets the bar high. The other point is that subsection (4), as he rightly said, puts into place the cap, which is also an important principle.
In summary, there are problems with the related system, but the principle of these penalties can and does work, as the hon. Member for Amber Valley referred to in her own example. And they do, the evidence suggests, help drive the compliance rates up in a reasonable way. So the principle of fixed monetary penalties has some merit. The two particular limits or restraints give me confidence and therefore the clause is to be welcomed in principle.

Lorely Burt: I agree with everyone who has spoken on this issue. It is a good principle to have penalties. We have had a lot of discussions about metaphorical parking tickets. I just want to make one point about fixed penalties. It is important that the penalty is appropriate, just like in “The Mikado”: let the punishment fit the crime. We should be wary of developing the mentality whereby one fixed penalty for one small company might be just as appropriate as a fixed penalty for a larger company. It is important to bear that in mind.
I draw the Minister’s attention to subsection (4)(b), that the relevant offence is
“punishable on summary conviction by a fine (whether or not it is also punishable by a term of imprisonment)”.
He referred earlier to the appeals system being through a tribunal. Does he not think that if we are talking about penalties that have the potential for someone to go to prison, we should have an appeals system that, if the company so wishes, goes through the courts and not through a tribunal?

Patrick McFadden: To turn to what the hon. Lady has just said, the company can appeal beyond the tribunal if it wishes to continue the appeal, but the appeal is to the tribunal.
On the level of fines, those are related to the offence, which is why we get the limit that we do. Subsection (4) sets out that the limit applies where the relevant offence is triable summarily and punishable on summary conviction by a fine. These sanctions are an alternative to prosecution; they are not the same as prosecution. Perhaps that might set out the difference between a fine and criminal prosecution as the hon. Lady outlines. The principle behind this is that the penalty should fit the crime involved. One of the problems that Professor Macrory identified was that only having criminal prosecutions as a sanction for some of these lower-level offences did not actually result in the compliance that we want to see. That is why a regime more akin to what my hon. Friend the Member for Amber Valley set out with regard to Companies House is something that we want to add to the regulators’ options in such a situation.
The level of fixed monetary penalty is related to the offence. The amount that we specified is in the order, and the regulator will simply file the appropriate amount based on the characteristics of the offence and the offender. In that sense, the punishment shall fit the crime. Regulators can apply that important new option to the lower-level but important offences that our constituents expect to see punished, but that sometimes go unpunished under the current regime because the only tool available is prosecution.

Question put and agreed to.

Clause 39 ordered to stand part of the Bill.

Clause 40

Fixed monetary penalties: procedure

Mark Prisk: I beg to move amendment No. 34, in clause 40, page 18, line 15, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.

Christopher Chope: With this it will be convenient to discuss the following amendments:
No. 35, in clause 40, page 18, line 17, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 36, in clause 40, page 18, line 20, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 37, in clause 43, page 20, line 23, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 38, in clause 43, page 20, line 26, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 39, in clause 43, page 20, line 30, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 40, in clause 43, page 20, line 31, after ‘regulator’, insert
‘or an independent person appointed by the LBRO’.
No. 47, in clause 40, page 19, line 9, at end add—
‘(7) In this Act “an independent person appointed by the LBRO” means a person who is not, and has not been, an employee of the LBRO company or a Crown servant and has, in the view of the LBRO, relevant qualifications and experience.’.

Mark Prisk: I spoke earlier of the potential injustice of a regulator both issuing a notice of intent to find somebody and then being the recipient of objections to that decision. Amendments Nos. 34 and 35 seek to correct that injustice by providing the option of having an independent person hear those objections. Specifically, the amendments would allow the LBRO to appoint that person, but they must be independent of the regulator concerned and they must have the relevant qualifications and experience. Although I think that parts of the procedure have merits, other parts have problems and the amendments will help by giving the accused—if we can use that phrase in this context—the sense that they have an option to seek some form of independent perspective on the matter rather than simply being able to turn back only to the regulator who is trying to fine them in the first place. I hope that the Minister will consider the matter with care.
I imagine that I address amendment No. 41 a little later on, Mr. Chope.

Christopher Chope: Yes.

Patrick McFadden: The hon. Gentleman’s amendment proposes the alternative that an independent person be appointed by the LBRO. Does he, therefore, see the LBRO appointing someone to operate, say, in the Environment Agency as a judge of whether a client of the Environment Agency—if we may use that phrase rather than the accused—has broken the law? How would the LBRO be able to ensure that level of specific expertise in the Environment Agency’s remit?

Mark Prisk: The intervention is helpful because it gets to the heart of whether the person involved has both ability and independence from the original representation. My reading of clause 40 would be that it would be quite appropriate for an independent person appointed by the LBRO to be able to make reasonable judgment as to whether the representations and objections made were appropriate. Therefore, it would be right for the LBRO to appoint someone who has the capability to do that. That is why the amendments do not simply say that we should appoint an independent person, but would give the system the opportunity to ensure that that person is appropriate and qualified. I think the amendments allow for that, but I am happy to debate it in due course. We will come to amendment No. 41 in a moment, but that is how I believe the proposal would work.
We want to ensure that the process is seen to be fair and reasonable. There is nothing worse than a system that is generally appropriate being let down by the perception of the client—to use the Minister’s word rather than the word accused—that they are facing a regulator who has already determined that they should be fined and that objecting will therefore have no purpose.
My concern is the small business that looks at this and thinks, “Hang on a moment, I’ve just been served this notice. Where do I turn to object? It’s the very people who will serve the notice back, so I’m just going to pay the fine and get on with my life because I’m not going to get a fair hearing.” That is my concern.

Patrick McFadden: The amendments and clause 40 are important because the clause sets out in detail how the fixed monetary penalties that we were discussing will be applied. There is a great deal of detail in the clause—for example, the issuing of a notice of intent under subsection (2)(a). A person may make written representations to the regulator in relation to that and they may ultimately appeal against the final decision, as we have discussed.
The amendments would intervene in the area of a notice of intent before a sanction has been imposed—that is their focus. We already know that there will be an appeal to an independent tribunal when a sanction is imposed. The amendments would add a second appeal earlier in the process when a notice of intent has been issued. They cover similar territory to the amendments discussed at length in the other place, but they are slightly different. I am still not entirely clear about who the independent person referred to in the amendment might be. My broader concern is that if the amendments were accepted, further provision would need to be made for that in the Bill. Details would have to be given about the powers of the person and the procedure for considering representations and so on.
Let us remember where we started: the recommendations from Professor Macrory that there should be greater simplicity and speed, and that there should be a greater variety of options available to regulators to ensure compliance. My worry is that the amendments will make the system over-complex by giving us two different appeal processes—one where a notice of intent is issued and one where a sanction is imposed, as already in the Bill.
The Bill provides a right of appeal to an independent and impartial tribunal on the final decision, as I have said. An appeal would be able to consider matters such as whether the regulator had unreasonably dismissed the objections referred to in the clause under subsection (2)(c)—objections raised to the sanction after the notice of intent.
The issue is whether we need two rights to have the case heard by two different persons, both before and after a sanction is imposed. The amendment would add a further level of bureaucracy and additional resources would be needed to set up and maintain a body that would hear all the representations. The process of imposing a sanction would be made much more lengthy and cumbersome. The amendment might actually take us back to the problem we are trying to resolve, which is how to give greater flexibility to regulators and have a variety of options in relation to the kind of offences we are talking about.
During the debates in the other place, my noble Friend Baroness Vadera addressed similar issues on similar amendments. She agreed that there was a need for high quality decision making by regulators, and we made changes to the guidance to the Bill to strengthen that. The guidance states that
“the regulator should have arrangements in place to review or monitor individual decisions. This will ensure that there is confidence in the regulatory system”.
We want to ensure that there is some quality in the decisions, but it is important to remember that there is a right of appeal against the final decision. The question before us is whether we need two rights of appeal in the process. I hope the Committee agrees that the right of appeal to an independent tribunal covers the issue of one regulator being judge and jury together, so we would not need the additional right of appeal at the earlier stage, around the notice of intent.

Mark Prisk: The debate has been useful. I fully recognise that there are weaknesses in the amendments, but the central issue is that all that is available to someone who has a sanction placed against them at the moment is an appeal to disprove their guilt—in other words, we have an appeal process after the event. The purpose behind the amendments was to find out how we could establish a means by which a person who has been accused is able to correct something or to challenge the process with someone who is not making the notice in the first place. The amendment is not necessarily about its own merits, but about highlighting a weakness in the existing system. Of course, if we are to have a civil procedure, it needs to be reasonably unbureaucratic and reasonably efficient. If it is to have the confidence of the community that it is trying to police, there needs to be confidence in an element of fairness. I am not confident that the procedure has that appropriate balance.
In a moment I will seek to withdraw the amendments, Mr. Chope, but I do so on that basis, which I hope the Minister will consider too. I will continue to see if there is a way through. Again I highlight the fact that we are talking about a regulated person, who may be a sole trader or an individual, who would look at the system, feel intimidated about going back to a regulator and therefore feel that they should just pay the fine and get on with it. I want to make sure that we have done everything that we possibly can to get the right balance between efficiency and fairness. I am not sure that it has been achieved so far—indeed, I am reasonably confident that it has not. I am not sure that the balance is appropriate. I have not found the magic answer, but the purpose of my amendments was to see whether there was a degree of reason. I hope that the Minister can indicate from a sedentary position that the Government are open to such suggestions.

Patrick McFadden: Always reasonable.

Mark Prisk: Always reasonable, always open. I am pleased that the Minister is happy to say that from a sedentary position. It is important that we can find some way forward, to make sure that there is confidence in the system. The danger, I suspect, is that there will not be, as currently constituted. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lorely Burt: I beg to move amendment No. 53, in clause 40, page 18, line 16, at end insert
‘may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.

Christopher Chope: With this it will be convenient to discuss the following amendments: No. 54, in clause 43, page 20, line 24, at end insert
‘and may require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.
No. 55, in clause 47, page 23, line 24, at end insert
‘and may by notice require the regulator to withdraw the notice and pursue the matter as a criminal offence under the relevant provisions’.

Lorely Burt: The amendments all have the same purpose. The provisions would enable the business to opt for court action, if preferred, even though it could face the prospect of a criminal conviction as a result, thereby ensuring that the option was available at the request not only of the regulator but also of the company. Businesses should not have to face the risk of unsubstantiated damage to their reputations until and unless they have been proved guilty. For many businesses, the risk to loss of reputation is worse than the cost of the appeal. Consequently, many businesses would take the sanctioning decision to appeal, and they should have the option of taking the decision through a criminal court, if they so wish.

Patrick McFadden: In a sense, the amendments are not too dissimilar from those that we discussed previously. They are coming at the issue from a slightly different angle, but I suspect that they are motivated by a similar concern. The hon. Lady said that the client—or the accused, whatever phrase we use—should have the choice, and the amendments would apply the choice to fixed monetary penalties, discretionary requirements or stop notices.
The new sanctions under the clause and following clauses are an alternative to criminal prosecution. They will be imposed only when a regulator is, as I have said, satisfied beyond reasonable doubt with the criminal standard of proof that a criminal offence has been committed. The regulator will have undergone a thorough and rigorous investigation and, at the end of the process, will have determined that a person is liable for the offence. The important question to be answered is whether we think that, after that process, it should be for the person, the business concerned or the regulator to decide what route the sanction takes.

Lorely Burt: I am interested in the route that the Minister is taking. He seems to be implying that, if a case is considered strong, the judge and jury have already gone out, come back and decided that the company is guilty. Given what he has said, I am even more concerned about pressing my case.

Patrick McFadden: I do not know whether what I have to say will ease the hon. Lady’s concern. The alternative set out in the amendments could leave the system open to abuse. For example, it could give someone who was accused of an offence a mechanism to delay the enforcement process by opting for a criminal prosecution and thus requiring the regulator to undergo another process after it has gone through the process of setting out its case and presenting all its evidence. There is a right of appeal to an independent tribunal but, as I said in respect of the previous amendments, we want a system that does not have to go through the same processes over and over again.
Allowing a person to choose which route to go down would not be in keeping with the Macrory review. In a proportionate sanctioning regime, criminal prosecution should be reserved for the most serious cases. That remains a weapon for serious breaches of the law. We are not saying that the new sanctions should replace that system entirely, but that they should replace it in some circumstances, and that can be assessed by the regulator only in view of all the cases before it.
The choice between civil and criminal sanctions should remain at the discretion of the regulator, not the person who is accused of the offence. We understand the concerns that members of the Committee might have about the new sanction powers being misused.

Ann McKechin: Can my hon. Friend confirm that, in Scotland, such measures would be inappropriate, as the decision whether to prosecute is in the hands of the procurator fiscal who takes the action on behalf of the regulatory authority? The regulatory authority does not have the discretion in that regard.

Patrick McFadden: The principle to which my hon. Friend referred is right. It is not for the accused to choose their route, which would be the result of the amendments. For both fixed monetary penalties and discretionary requirements, there will be an opportunity for a person to make representations to the regulator before the sanction is imposed. It will enable the person to raise defences and challenge the case against him or her and to challenge the evidence relied on by the regulator.
The ultimate appeal will be referred to an impartial, independent tribunal. The tribunal will also have the power to overturn or reduce the level of the penalty imposed by the regulator or take any other steps that the regulator could have taken in relation to the incidents of regulatory non-compliance. The Bill contains broader safeguards in the form of the review clauses that we referred to earlier—such as that relating to part 3—and suspension provisions, which we discussed in relation to parts 1 and 2.

Mark Prisk: It is a peculiar argument that, if someone is allowed the option of choosing the criminal path, that will somehow lead to a flood of cases. The truth is that an individual would choose that path under only the most exceptional circumstances. Does the Minister recognise that it would be a tiny number? Clearly, most businesses would not wish to go down that path. It is a thin argument.

Patrick McFadden: The hon. Gentleman allows me to turn again to the impact assessment. That states that from the Bill’s overall estimated benefit to business—which comes to an annual sum of £200 million—the biggest proportion will probably come through this part of the Bill due to savings made from fewer court appearances for businesses and fewer lengthy legal costs in criminal prosecution cases. Those are significant savings to business.

Mark Prisk: It is a fascinating extract, I am sure, but it does not answer the point. The idea that having that option available will suddenly regularly increase the burden to business is not right. This will affect a tiny handful, a very small proportion of businesses. It is about ensuring, where there are no other options and no independent person to appeal to before being found guilty, that this option exists should a business feel that it would like to have its day in court and stand before the law. That is why it would exercise it and that is why it is an important principle.

Patrick McFadden: In the end it comes down to a judgment about the safeguards in the Bill. We had this discussion on the previous set of amendments that were moved by the hon. Gentleman and this is a similar matter. The Government’s view is that there should be the right to make representations to the regulator on the basis of a notice of intent being issued—something set out in the clauses that the amendments seek to change. The notice of intent must include the grounds for the proposal and set out the right to make such representations, objections and so on. There is also the right of an independent appeal to the tribunal, which is independent, impartial and separate from the regulator. As I said, should we judge that the powers are not being used properly after the enactment of the Bill, the wider review and suspension provisions provide adequate safeguards. In the end, it is also a judgment about whether the person accused or the regulator should decide the path of its function.

Ann McKechin: Does the Minister agree that we should stick to the general principle that prosecutions should be taken if they are in the public interest, not because of personal requirements? I am disappointed that the Opposition do not recognise that prosecutions should be taken in the public interest. There is a general principle that should be applied here and that is what the Bill tries to put in place.

Patrick McFadden: I agree with my hon. Friend, and I am happy to confirm to her that officials did consult the office of the procurator fiscal on the measures.

Lorely Burt: I was interested to listen not only to the Minister but to the hon. Lady. I do not agree that public interest should override individual fairness. I have listened carefully to the Minister when he talked about people who might try to exploit the system and delay the process for their own financial ends. Even so, if justice is done then in the end these individual companies will be punished. The delay in punishment of a few rogue traders should not be at a loss to everyone else, particularly companies that are innocent or that value greatly the loss of their reputation, which is an extremely serious consequence for them. I do not believe that the regulator or anybody else should take that right away from them.
To use an analogy from civilian life, a person might be accused of stealing a loaf of bread, but they have the option of electing to go before a jury, not because of the value of the loaf of bread but because of the value of their individual reputation. I do not believe that that option should be taken from companies. I therefore wish to press the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Mark Prisk: I beg to move amendment No. 41, in clause 40, page 19, line 4, at end insert—
‘(5A) The final notice must offer the person the opportunity to pay the prescribed sum mentioned in subsection (2)(b) within a specified time limit.’.
The amendment would insert between subsections (5) and (6) of clause 40 the phrase:
“The final notice must offer the person the opportunity to pay the prescribed sum mentioned in subsection (2)(b) within a specified time limit.”.
What is this about? It is very simple in a way. It is the classic dilemma that one faces when confronted with a notice to pay something or an accusation: should one make a representation and lose out as a result? The amendment would correct that. A defendant should not be at a disadvantage simply because they want to make a written representation or an objection. Justice is not well served by placing a pressure on a defendant to accept a penalty regardless of their innocence in order to reduce the potential fine. The amendment would ensure that if someone decided, as they are entitled to, to make a written representation and if that representation was overruled, that defendant would still receive a discount for any other payment. There should be no financial inducement one way or the other; they should be able to make those representations.

Patrick McFadden: I understand the sentiment behind the amendment. I do not want to put words into the hon. Gentleman’s mouth and I am sure he will correct me if I am summarising this wrongly, but I think that what he is trying to say is that people should not be penalised for choosing to make representations. I understand that, but I believe that the amendment is not necessary to ensure that that is the case. Clause 40 allows the discharge payment to be set at a lower level than the fixed monetary penalty to, for example, reflect procedural savings from an early admission to liability by a business, so we have that already. Once the penalty has been imposed, clause 52(1) deals with the situation that he is concerned about. The clause states:
“An order under this Part...confers power on a regulator to require a person to pay a fixed monetary penalty.”
That may include provision “for early payment discounts” and so on. The provision allows the regulator to offer an early payment discount should a business decide to pay the penalty immediately. That is once the penalty has been imposed. The discharge payment and early payment discount could be set at the same level. We obviously need to specify that in the Bill as there may be circumstances in which the amounts could differ. The amount of the discharge payment and the fixed monetary penalty and any subsequent early payment discount will be set out in the order made under part 3. As I said before, such orders will be subject to the affirmative resolution procedure, so Parliament will have the ultimate say in deciding that.

Mark Prisk: May I take it that the Minister is saying that it is the intention of the Government, when presenting such an order, to ensure that no such penalty—from making a representation or seeking an objection—will be unintentionally permitted through any order? Do the Government intend to ensure that someone in the circumstances that I have described in my amendment would not be penalised?

Patrick McFadden: I think that the situation is certainly covered. I hesitate to say that it is covered in every instance. The discharge payment and the early payment discount, as set out in clause 52(1), could be set at the same level and that would be determined when the order comes forward. I do not think that the hon. Gentleman’s amendment is necessary, but I hesitate slightly in saying that that would be the case in all circumstances.

Mark Prisk: That has been very helpful. The Minister has married clause 52 together with clause 40. I was not clear that the two welded together quite as neatly as he and his advisers were able to adjudge. I am encouraged by the fact that it is clearly not the Government’s intention for someone to suffer such a penalty. I understand that one or two areas may slip through. If it is going to be an order by positive resolution to come before the House to ensure that such arrangements are made in detail, that gives me due comfort. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 ordered to stand part of the Bill.

Clause 41

Fixed monetary penalties: criminal proceedings and conviction

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause ensures that where the regulator serves a notice of intent on a person prior to imposing a fixed monetary penalty, that person cannot be criminally prosecuted for the same event to which the notice relates during the period within which they can discharge their liability to the penalty. Similarly, a person cannot be prosecuted for the same event if they discharge their liability to the penalty or the regulator decides to go ahead and impose it. That is down to familiar reasons of double jeopardy. Unpaid monetary penalties will be forced through the civil courts. The Bill, and clause 52 in particular, will ensure that regulators have access to an efficient and streamlined procedure for recovering monetary penalties.

Question put and agreed to.

Clause 41 ordered to stand part of the Bill.

Clause 42

Discretionary requirements

Mark Prisk: I beg to move amendment No. 42, in clause 42, page 19, line 35, after ‘determine’, insert
‘subject to a maximum amount to be prescribed by order by a Minister of the Crown’.
Amendment No. 42, ironically to clause 42, deals with discretionary requirements and tries to put some form of cap, some maximum limit, on the amount of fine. At the moment, the regulator can impose whatever fine it wishes. There is no stated maximum in the Bill. Given that the regulator has wide powers to investigate, effectively prosecute and be the jury, it seems inappropriate to provide unlimited powers regarding the scale of the fine. There needs to be some appropriateness, not least given the principles that we are meant to be following in terms of Hampton and Macrory. Therefore, the purpose of the amendment is, first, to send that signal. There is a need for the regulators to have a clearly defined limit, but the amendment would allow the Minister to set that limit, and do so by order. There is some flexibility; we have not sought to put a figure on that limit. I would be interested to hear the Minister’s response to the points that underscore the amendment.

Patrick McFadden: The amendment intends to impose a cap on variable monetary penalties. We have a cap on fixed monetary penalties, but that goes back to the point made by the hon. Member for Solihull about the punishment fitting the crime. The cap for fixed monetary penalties relates to the nature of the offences; having a cap for variable penalties would be analogous to capping Crown court fines. A cap on variable penalties, while debated a lot in the other place, is different from a cap on more minor, summary offences. We continue to believe that a cap for the most serious offences would not be appropriate. I would be interested to know what level the hon. Gentleman thought might be appropriate. Even in the current regime, without the new powers, sanctions and fines that run into millions of pounds have been imposed. I am not sure where such a cap would be set in any meaningful way.
The issue is not just the level of the fine, but the kind of offence. The hon. Member for Solihull is right that the level of penalty should be related to the level of offence, rather than being a number that a Minister may set down in an order. Regulators must be able to capture any financial benefit gained from non-compliance. One of the weaknesses of the current system is that sometimes fines imposed are small in relation to the benefit that the offender has gained by committing the offence. That was one of the recommendations in both Hampton and Macrory. If a business knows that profit gained from committing the offence will be removed, with the possibility of an additional penalty on top, a potential incentive to try to break the law and get away with it is removed. We fear that if a cap on the fine is set down, that could deter compliance and militate against ensuring a level playing field for compliant businesses.
In making an order under part 3 of the Bill, the Minister may consider whether a cap is necessary, but we do not think that there should be an obligation on the Minister in every case, as I believe would be the effect of the amendment. Setting a cap on the monetary penalties is not simple, because it involves deep knowledge of the regulatory law, the relevant market conditions and the amount of benefit that has accrued to the offender through committing the offence, over what could be some time. Professor Macrory ruled out a cap based on a business’s turnover, as he thought that that would pose undue legal complexity. The regulator will be required by clause 62 to publish guidance, setting out the criteria that it is likely to take into account when setting the level of variable monetary penalties, so there will be some transparency in the process, but the amendment proposes a mechanism that would effectively cap variable monetary penalties in every case.

Judy Mallaber: My hon. Friend referred to the Macrory report. Does he agree that some of the fines that it quotes for health and safety offences are absolutely shocking? Some businesses have benefited 10 times as much by non-compliance as they have ended up being fined. Any cap on discretionary fines would not enable the necessary discretion to charge a business a low fine where appropriate while ensuring that an organisation doing something completely out of order was not left in pocket as a result of non-compliance.

Patrick McFadden: That is one danger of capping in every case. I am not saying that a cap would never be appropriate in any circumstances, but the amendment as I understand it would cap in every case. Making the punishment fit the crime, or imposing a penalty appropriate to the gain accrued to a business for its non-observation of the law, is an important and relevant problem.
A list of possible criteria for the variable monetary penalties is set out in page 38 of the guide to the Bill. They include the seriousness of the non-compliance, the business’s disciplinary record and whether the business has taken any action to address the harm caused by non-compliance, and they may differ from area to regulatory area. A business will, of course, be able to raise objections to and make representations about the level of penalty after the notice of intent is issued and, again, will be able to appeal against the penalty if it considers the amount unreasonable. If the tribunal agrees with the appellant, it will have the power to withdraw or vary the penalty imposed.
To sum up, requiring a cap on variable monetary penalties in every case might mean that regulators were tempted back down the road of criminal prosecution. There is no limit on Crown court fines, and many of the offences that we are discussing would be triable in Crown court. We do not want to create an incentive between the two regimes for regulators to favour criminal prosecution in the Crown court, which has no cap, to a system with a cap in every case. I understand the point made by the hon. Member for Hertford and Stortford, but I hope that he will decide on that basis not to pursue his amendment.

Mark Prisk: It has been a helpful debate. As the Minister rightly said—I think that it is the most important point in the Bill—guidance has already been established. He explored several instances, which I did not notice in reading the explanatory notes, that set out the options available when considering a cap, and not only the options available to Ministers. The Government, rightly, do not reject the principle of a cap but rather recognise the dangers of limitation. I fully understand.
It is also important, however, to bear in mind that the amendments are a symptom of a wider concern. The nature of the system is such that someone whose guilt must be proved against them does not have the option of putting their case before an ordinary court of law, so one wants to make sure that the Government are aware of the dangers in the other parts of the system, hence the amendment and some of the previous amendments.
My purpose in tabling the amendment was to establish exactly what the Government’s view of the caps was. They clearly accept the need for caps in certain cases, and I agree, but on balance, I think that the Minister is probably correct to say that it would be a mistake to write a statutory, narrow and strict requirement into the Bill. That is a perfectly reasonable argument. It has been a useful debate, and on that basis I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause is important. We covered some of the ground during debate on amendment No. 42, but clauses 40 and 49 are about fixed monetary penalties. This clause is about discretionary requirements, and, again, expands the suite of options available to regulators in trying to ensure compliance with the law. Subsection (2) requires the regulator to be satisfied beyond reasonable doubt that a person has committed the relevant offence before imposing a discretionary requirement. The discretionary requirements themselves are set out in subsection (3) and include variable monetary penalties, which we have just discussed; compliance notices, which are notices requiring a business to take steps within a time period as may be specified to ensure that the instance of non-compliance does not continue or recur; and restoration notices, which are notices requiring a business to take steps as far as possible to restore the position to what it would have been had the non-compliance not taken place.
Many of us, when we talk to local enforcement officers, will recognise this and see the sense behind it. Most enforcement officers I have talked to do not want to go around fining everybody and taking everybody to court and issuing penalties right, left and centre. What they most want to do is ensure compliance, and sometimes that just means restoring the position to what it would have been had the non-compliance not taken place.
Discretionary requirements are aimed at addressing offences where a greater degree of flexibility may be required in order to sanction the offence appropriately. This may be more suitable in more complex cases of non-compliance, where there are a number of different effects and consequences that need addressing. For example, if a business has spilled toxic waste or chemicals on parkland, a regulator might want to impose not just a fine, but a restoration notice to order the business to restore the position to what it would have been had that offence not occurred. The regulator may also want to impose a compliance notice to make sure that a business takes steps to ensure that the offence does not continue or reoccur. If the business has clearly gained a benefit from failing to comply with regulations, the regulator may in addition want to impose a variable monetary penalty. In the public interest, this gives regulators a greater variety of options to ensure not just that monetary penalties are imposed, but that action is taken to rectify the initial breach of the law.
Subsection (4) prohibits a regulator from imposing a discretionary requirement upon a person on more than one occasion in relation to the same act or omission, and subsection (6) goes back to our discussion about summary only offences, which are capped, and the maximum fine available to the magistrates court is usually £5,000.
Discretionary requirements will allow regulators to deal with instances of non-compliance in a more proportionate and targeted way, and the clause is very important in carrying forward the recommendations made by Professor Macrory for more flexibility and proportionality in the system.

Question put and agreed to.

Clause 42 ordered to stand part of the Bill.

Clause 43 ordered to stand part of the Bill.

Clause 44

Discretionary requirements: criminal proceedings and conviction

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause ensures that where a business is required to pay a variable monetary penalty, whether alone or in combination with non-monetary discretionary requirements or undertakings, the order made by the Minister must secure that the person may not be prosecuted at a later date for the same incident of regulatory non-compliance. This, again, is because of the principle of freedom from double jeopardy. Variable monetary penalties will be enforced through the civil courts. The Bill, particularly clause 52, to which I referred a little while ago, will ensure that regulators have access to an efficient and streamlined procedure for recovering monetary penalties.
I draw attention to clause 44(3), by virtue of which the restriction does not apply where a non-monetary discretionary requirement is imposed or an undertaking is accepted without the imposition of a variable monetary penalty. In such cases, where the business fails to comply with the sanction—we talked about a business that might have spilt chemicals on parkland and so on—it may be prosecuted at a later date for the original offence. The nature of non-monetary requirements is not as punitive, and therefore we believe that it is fair to allow regulators to pursue a prosecution in such cases, where a business fails to comply with the original requirement to restore the situation. Subsection (4) allows for the period within which criminal prosecutions may be instituted to be extended.

Question put and agreed to.

Clause 44 ordered to stand part of the Bill.

Clause 45 ordered to stand part of the Bill.
Further consideration adjourned.—[Alison Seabeck.]

Adjourned accordingly at twenty-one minutes past Six o’clock till Thursday 19 June at Nine o’clock.